Actually, you can play PS2 ISO's without a mod-chip, and without using disks!!! This is what I did; PS1 gamesave exploit.
First you need the shtuffs. I did this to my Phat original PS2. I got the ethernet adapter for it (the one with HDD IDE connection AND ethernet port) then I got myself a HDD that was compatible with it. HDD Compatibility list is here:
http://ps2drives.x-pec.com/?p=list
I have a fairly small one, but you can go up to like 500GB as long as you have the proper programs to support large HDD's. Just check with that list before getting a HDD (some don't fit in the drive slot on the PS2, and you have to bust it apart to make it fit, or keep it outside your PS2, which isn't fun.)
Anyways, you need a PS1 game. There are guides on how to do this online, but essentially you need to get something to transfer gamesaves over to your PS2 (pssstt, gameshark or action replay that supports flash disks works a charm!).
Look up a guide on google; Some of the info is kind of scattered (and frankly, I can't remember where I got any of it from!) but with some research you can find the stuff you need.
basically, you get the ps1 game in your pc, read the code from it to know what gamesave will load when the game is booted, you feed that through a gamesave maker and put the required files into the gamesave using the gamesave maker or w/e, and transfer the save to your PS2 mem card using action replay or gameshark. When you start up the PS2 with the PS1 game in that you got the code from, it will load into your elf file that you put in the gamesave! From there, you get stuff like HDLoader (lets you back up PS2 games from the disks straight to the HDD) and HDL Server (to transfer games over LAN instead of taking apart your PS2 and your PC every time you xfer)
some things that will help -
http://sksapps.com/ Has a ton of PS2 apps that are useful. Their forums have some useful info too. Good place to start for PS2 stuffs. There's even ways to play PS1 backup through this method (bit difficult though, and may not be worth the effort).
lol. Research research research! Oh yeah, if you want to have a large HDD (like 500GB lol), look for the HDloader patcher. Should be on sksapps
Oh yeah, watch out for failing PS2 disk drives though!!! Mine already is acting up and I have trouble with games on it. If it completely goes out, I won't be able to use the PS1 savegame exploit anymore =(